Survey of Current Business

Chronicling 100 Years of the U.S. Economy

June 2020
Volume 100, Number 6

GDP and the Economy

Second Estimates for the First Quarter of 2020

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Real gross domestic product (GDP) decreased at an annual rate of 5.0 percent in the first quarter of 2020, according to the second estimates of the National Income and Product Accounts (NIPAs) (chart 1 and table 1).1 In the fourth quarter of 2019, real GDP increased 2.1 percent.

The decrease in real GDP in the first quarter reflected negative contributions from consumer spending, inventory investment, nonresidential fixed investment, and exports that were partly offset by positive contributions from residential fixed investment and government spending.2 Imports, which are a subtraction in the calculation of GDP, decreased (chart 2 and table 1).

With the exception of residential fixed investment, all GDP components contributed to the downturn in real GDP in the first quarter. Imports decreased more in the first quarter than in the fourth quarter.

  • Consumer spending turned down, reflecting a downturn in spending on services and a slowdown in spending on goods.
    • The largest contributors to the downturn in services were health care, food services and accommodations, and recreation services, as stay-at-home orders to protect against COVID-19 affected both the availability of and demand for services in these categories (see “Impact of the Coronavirus (COVID-19) Pandemic on the First-Quarter 2020 GDP Estimate”.)
    • Within goods, the main contributors to the slowdown were downturns in motor vehicles and parts and in clothing and footwear. Notable offsets included upturns in food and beverages purchased for off-premises consumption (groceries) and in other nondurable goods (mainly a larger increase in spending on pharmaceuticals).
  • The larger decrease in inventory investment reflected a larger decrease in nonfarm inventory investment. The main contributors to the larger decrease were downturns in nondurable goods wholesale trade (led by petroleum and petroleum products) and in nondurable goods manufacturing (similarly, led by petroleum and coal products). A notable offset was an upturn in retail trade (more than accounted for by motor vehicles and parts dealers).
  • The downturn in exports reflected a downturn in exports of services, led by travel.
  • Within nonresidential investment, equipment investment decreased more in the first quarter than in the fourth quarter, primarily reflecting a larger decrease in transportation equipment and a downturn in information processing equipment.
  • The smaller increase in government spending primarily reflected downturns in state and local consumption expenditures and in federal defense gross investment.
  • The larger increase in residential fixed investment reflected accelerations in both improvements and new housing units.
  • The larger decrease in imports reflected a downturn in services, led by a downturn in travel and a larger decrease in transport services.

Prices for gross domestic purchases, goods and services purchased by U.S. residents, increased 1.7 percent in the first quarter after increasing 1.4 percent in the fourth quarter (table 2 and chart 3). The larger increase reflected accelerations in the prices paid for state and local government spending, for inventory investment and for nonresidential fixed investment, which were partly offset by a deceleration in prices paid for consumer spending.

Food prices increased 3.2 percent after increasing 0.4 percent. Prices for energy goods and services turned down, decreasing 6.0 percent in the first quarter after increasing 4.7 percent in the fourth quarter. Gross domestic purchases prices excluding food and energy increased 1.8 percent in the first quarter after increasing 1.3 percent in the fourth quarter.

Consumer prices excluding food and energy, a measure of the “core” rate of inflation, accelerated, increasing 1.6 percent in the first quarter after increasing 1.3 percent in the fourth quarter.

Chart 3. Prices for Gross Domestic Purchases

[Click chart to expand]

Personal income (table 3), which is measured in current dollars, increased $104.7 billion in the first quarter after increasing $168.2 billion in the fourth quarter. The smaller increase primarily reflected a downturn in private wages and salaries, most notably in services-producing industries, which was partly offset by an acceleration in personal current transfer receipts.

Personal current taxes increased $13.8 billion in the first quarter after increasing $25.0 billion in the fourth quarter.

Disposable personal income (DPI) increased $90.9 billion in the first quarter after increasing $143.2 billion in the fourth quarter. Personal outlays decreased $230.1 billion in the first quarter after increasing $118.8 billion in the fourth quarter, primarily reflecting the downturn in consumer spending.

The personal saving rate (chart 4)—personal saving as a percentage of DPI—was 9.6 percent in the first quarter; in the fourth quarter, the personal saving rate was 7.7 percent.

Real DPI (chart 5) increased 0.9 percent in the first quarter after increasing 2.1 percent in the fourth quarter. Current-dollar DPI increased 2.2 percent after increasing 3.5 percent.

With the release of the second estimate of GDP, the Bureau of Economic Analysis also released revised estimates of fourth-quarter 2019 wages and salaries, personal taxes, contributions for social insurance, and gross domestic income (GDI). These estimates reflect new data for fourth-quarter private wages and salaries from the Bureau of Labor Statistics Quarterly Census of Employment and Wages. As a result:

  • Wages and salaries is now estimated to have increased $112.3 billion in the fourth-quarter, an upward revision of $25.7 billion.
  • Personal income is now estimated to have increased $168.2 billion, an upward revision of $24.0 billion.
  • Real DPI is now estimated to have increased 2.1 percent; in the previously published estimate, real DPI increased 1.6 percent.
  • The personal saving rate is now estimated at 7.7 percent; in the previously published estimate, the personal saving rate was 7.6 percent.
  • The percent change in fourth-quarter real GDI (table 1) is now estimated at 3.1 percent; in the previously published estimate, real GDI increased 2.6 percent.

Real GDP decreased 5.0 percent in the first quarter of 2020, a downward revision of 0.2 percentage points from the advance estimate (table 4). The revision primarily reflected a downward revision to inventory investment that was partly offset by upward revisions to consumer spending and nonresidential fixed investment.

  • Within inventory investment, nonfarm inventories was revised down. The largest contributors to the downward revision were nondurable goods manufacturing and wholesale trade inventories (led by petroleum products).
  • Consumer spending for both goods and services was revised up.
    • Within goods, the leading contributors to the upward revision were food and beverages and motor vehicles and parts (specifically, purchases of new light trucks). A notable offset to these revisions was a downward revision to gasoline and other energy goods.
    • Within services, the largest contributors to the upward revision were spending on health care, by both nonprofit institutions and households. These upward revisions were partly offset by downward revisions to other services, notably, spending on international travel by U.S. residents.
  • Within nonresidential fixed investment, the largest contributor to the upward revision was investment in structures, notably, commercial and healthcare structures.

Measured in current dollars, profit from current production (corporate profits with the inventory valuation adjustment (IVA) and the capital consumption adjustment (CCAdj)) decreased $295.4 billion, or 13.9 percent at a quarterly rate, in the first quarter after increasing $53.0 billion in the fourth quarter of 2019 (table 5). Profits of domestic financial corporations decreased $67.4 billion; profits of domestic nonfinancial corporations decreased $169.5 billion.

Profits after tax (without the IVA and CCAdj) decreased $303.6 billion.

 


  1. “Real” estimates are in chained (2012) dollars, and price indexes are chain-type measures. Each GDP estimate for a quarter (advance, second, and third) incorporates increasingly comprehensive and improved source data; for more information, see “The Revisions to GDP, GDI, and Their Major Components” in the January 2018 Survey of Current Business. Quarterly estimates are expressed at seasonally adjusted annual rates, which reflect a rate of activity for a quarter as if it were maintained for a year.
  2. In this article, “consumer spending” refers to “personal consumption expenditures,” “inventory investment” refers to “change in private inventories,” and “government spending” refers to “government consumption expenditures and gross investment.”